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The new Discovery Bank which is based on a model of rewarding good financial behaviour enters the market during a period of constrained household savings and rising debt levels as consumers battle the effects of prolonged low growth levels.
But the giant health and financial services giant believes that the tough economic conditions would not affect the bank, but in fact tie in well with the bank's business strategy of encouraging financial wellness.
“The bank’s model is almost entirely aligned with the current economic times, as it would help people navigate the tough economic times and help them improve their financial conduct,” said Hylton Kallner, Discovery Life CEO.
“It was built exactly for that …. the conditions are consistent with ensuring that people bank better and it encourages savings, reducing debt levels and would reward people for managing their money well. But naturally we would have preferred the environment to be healthier,” he added.
In a country where traditional banking is king, the “tech-led” bank which will be accessed via a mobile App is described as "the world's first behavioural bank" but its founders are confident that the method would not alienate those who are not tech-savvy.
“The absence of brick and mortar branches would not only afford provide the ease of banking to our customers, it would also reduce the cost of doing business,” said Kallner.
READ: Discovery’s new bank signals shift as new entrants plan launches over the next six months
With the high cost of data which enables internet access still very high for many consumers, Kallner stressed that customers would be able to access the bank’s App even if they have no data.
He dismissed the thinking that its model was elitist and would mainly appeal to the company’s existing client base, particularly those who are on the Vitality loyalty programme who already have a sense of the benefits of the company’s reward system.
The company said its existing clients would benefit from integrating their Discovery products with the bank, "through access to more affordable life insurance, faster-growing investments, smarter insurance and convenient payments for healthcare expenses."
However, one of the key features of the bank is its interest rates structure, which is linked to clients’ financial behaviour and allows them to earn more interest on savings and pay less interest on credit based on their financial behaviour with Vitality Money.
Apart from the rewards programme, the banks biggest draw card would be a planned 10% ownership to be allocated to black depositors, an incentive which is bound revolutionarise the banking industry. The scheme which would be funded through vendor financing will come at no cost to customers.
Kallner said the company was still in the process of working out the structure of the package.
But the bank is set to face competition from other rival new entrants in the mobile space, including Bank Zero which is a mutual bank co-founded by former FNB CEO Michael Jordaan and TymeDigital which is controlled by African Rainbow Capital.
Bank Zero is expected to be fully operational by around mid-2019, while the Discovery Bank would hit the market in March 2019.
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